EB-5 Updates

May News and Information

Now to tear myself away from the exciting work of writing business plans and assisting with RFEs, and comment on what’s new in EB-5.

• Everyone wants to know whether USCIS has issued any further rumblings on the tenant occupancy issue. So far as I know, we have nothing except the Operational Guidance letter that repeats Director Mayorkas’ statement from the 4/27 meeting. No word on when and if we will get the engagement with the USCIS economists promised “ASAP” at the 4/27 meeting. Some applicants did file RFE responses at the beginning of May, despite the extended deadline, and I look forward to seeing how USCIS reacts to the various fact-specific arguments presented in those responses. Angelo Paparelli and Brandon Meyer have written an article that discusses the issues involved and includes many useful links. See Immigration-Agency Lawbreaking Revealed: USCIS’s EB-5 “Tenant-Occupancy” Scandal.
• As of May 31, we have 122 days remaining until the Regional Center program sunsets. The word on the street at the IIUSA conference last month was that Congress would probably reauthorize the program at the last minute for a limited period of time, possibly three years. However, there has been recent activity in the House and Senate, including a bipartisan bill introduced by Senator Leahy last week to permanently authorize the program. You are encouraged to join the advocacy effort by writing to your Congressperson.
• According to the USCIS EB-5 Regional Center page (as updated 5/30), actual I-924 processing times are 7 months for the I-924 Initial Application and 9 months for the I-924 Amendment Application as of 4/30/2012. Amendments are generally simpler than initial applications, so I suppose that relative volume of amendments must be behind the longer processing times.
• The I-924 form is shortly up for revision, and you have the opportunity to help improve it.
• The State of California has added to the TEA drama by posting a letter listing counties, MSAs, and cities that qualify as TEAS and announcing that there will be no other areas or subareas designated and no new customized designations. In other words, no Census Tract designations. See the State website, and additional perspective in a posting at the Hotel Law blog.
• And a few more recent EB-5 articles that the cool kids are reading:
  • Joe Whalen’s EB-5 Roundup from the 4/27 EB-5 Investment Summit
  • What is a “Reasonable Investigation” of a Regional Center Project? from the EB-5 Due Diligence Blog
  • Top 10 Ways to Make the Immigrant Investor Program Work from the AILA Leadership Blog
  • Making Visas-for-Dollars Work from the New York Times
  • More Wealthy Chinese Said to Prepare Exits from the Wall Street Journal

“Operational Guidance” for the Tenant Occupancy Issue

The USCIS Office of Public Engagement just released a brief letter of “Operational Guidance” with the promising subject line: “Guidance on EB-5 Adjudications Involving the Tenant-Occupancy Methodology.” The letter treats the issue of deference to prior adjudications, and echoes the statement that Director Mayorkas made at the April 27th engagement.

Mayorkas Statement on Tenant Occupancy

Today’s “Conversation With The Director – Tenant-Occupancy Economic Model” proceeded much as I expected, with participants airing concerns and confusion and Director Mayorkas maintaining that issues in the “tenant occupancy RFE” reflect fact-specific questions, not new policy. The Director made a useful opening statement, which I have transcribed below.  Pay attention to his comments on the specific types of previous approvals that may be given deference. Director Mayorkas promised that a follow-up engagement involving the USCIS-contracted economists will be arranged ASAP, with a tip sheet of econ analysis guidance to follow. He also agreed to inquire into the possibility of getting the RFE deadline extended to allow more time for those who want more guidance before responding.

Transcription of the opening statement by Director Mayorkas 
We are focused this morning on the tenant occupancy economic methodology. We appreciate the fact that there is a lack of certainty in the community with respect to how our agency is addressing EB-5 applications and petitions that are predicated on that methodology to prove the required job creation. We thought we should have this engagement to address the uncertainty.
Our intention this morning is to clarify for you what we have done and are doing with respect to cases that are predicated on the tenant occupancy methodology. It is not, I should say at the outset, it is not my intention to discuss the intricacies of the economic methodology itself, though we will certainly listen to your concerns and address them as and when appropriate.
First, if I can provide you with some assurances. We well understand the law, that there is no requirement to present a particular methodology in support of a petition. Rather, the law requires a “reasonable” methodology. Whether or not the tenant occupancy methodology is reasonable in proving job creation in a particular case is a fact-specific and fact-dependent inquiry. We have not changed any policy with respect to the tenant occupancy methodology, nor have we changed the applicable criteria.
This is, instead, what we have done. In response to the request of adjudicators and your — stakeholders’ – request – and a very appropriate request — we have hired full time economists and business analysts to improve the analysis of EB-5 petitions and the quality of our work. I should note also that we have announced or are about to announce other positions as well such as a hiring of corporate attorneys to interpret the many legal documents that petitions often include. Our new experts have reviewed cases, not previously adjudicated, that are predicated on the tenant occupancy methodology, and based on the specific facts of those cases have raised questions as to whether the evidence presented proves the required job creation, or instead merely establishes job relocation, for example. We have issued Requests for Evidence to obtain additional evidence that our experts will review and analyze.
A decision, as I mentioned, on the economic methodology presented in the EB-5 case, including the tenant occupancy methodology, is very fact specific. Consistent with our deference policy, we are communicating to our adjudicators that they are to accord deference to prior adjudications. Our adjudicators should rely on a previous determination that the economic methodology is reasonable when the economic methodology is presented to us in later a proceeding based on materially similar facts.
For example, if we approved a Form I-924 Regional Center Application based on a specifically-identified project, including the specific locations and industries involved, we will not revisit the determination that the economic model and underlying business plan were reasonable when adjudicating related Form I-526 petitions, Form I-485 applications, or Form I-829 petitions. If we approved an I-526 petition for an immigrant investor based on a specifically-identified project, not associated with a Regional Center, we will not revisit the determination that the business plan was reasonable when adjudicating the investor’s related I-485 or I-829 petition. If, however, the facts underlying the application of the economic methodology have materially changed, then we will conduct a fresh review of the new facts to determine whether the petitioner or applicant has complied with the requirements of the EB-5 program, including the job creation requirement.

That is, in summary, what we have done, and what we have not done.

I have uploaded my recording of the meeting to Dropbox, for the convenience of those who would like to re-listen for insights or actionable points that I missed.

Advice for Amendments

I recently noticed that USCIS has uploaded an Executive Summary for the 01/23/2012 EB-5 Stakeholder meeting. Significant topics include TEA designation, investment in real estate, Regional Center geographic area, and Regional Center amendments.

Amendments are an area of mystery for EB-5 Regional Centers. We know that we’re supposed to use the I-924 form — the same form as for initial designation — but it’s not perfectly clear what kind of changes require amendments and what evidence needs to accompany amendment requests. I have collected amendment-related advice in my log of Q&A with USCIS, and also recommend this Q&A from the 01/23 Executive Summary linked above.

Q: Please clarify the documentary requirements for a Regional Center amendment filing if the amendment is solely to (a) change industry code; or (b) change geography; or (c) change economic methodology.
A:
a) Change Industry Code:
A change or request for a new industry code should include all the information that is usually submitted with the initial I-924 in relation to a request for an industry category, and requires the petitioner to submit a new or significantly revised business plan and economic impact analysis. The evidence submitted should include a comprehensive and transparent business plan, economic impact analysis, and job creation analysis to demonstrate that, following the preponderance of evidence standard, the regional center will be targeting the EB5 investment in that industry. Please note that the industry code should be as specific as possible, using as many digits as possible. In addition, considering the fact that the magnitude of economic impact multipliers vary by industry, the petitioner should submit a revised economic impact analysis that uses multipliers which correspond to the newly-requested industry
(b) Change Geography:
A change in the geographic scope of the regional center should include all the information that is usually submitted with the initial I-924 to demonstrate the following pursuant to 8 CFR 204.6(m)(3): that the regional center will be focusing on the requested geographic region; that there will be promotion of regional or national growth; and that there will be a regional or a national impact.
The evidence submitted should include a valid and reasonable statistical or economic justification that the proposed investment activities will have an economic impact on the entire, clearly defined geographic region. This justification is often presented in the form of commuting patterns (as obtained from the U.S. Census Bureau) or geography-specific economic trends (usually obtained from the 2007 Economic Census). In addition, the petitioner should explain to USCIS if the market conditions significantly differ from the originally-requested region and also submit revised economic impact estimates that use multipliers that correspond to the newly-requested geographic territory.
(c) Change Economic Impact Methodology:
A change in economic methodology should include all of the information that is usually submitted with the initial I-924 to demonstrate that the economic methodology, as it relates to the associated business plan, is using data that is transparent, applicable, reliable, and up-to-date. USCIS would need to see a revised economic impact analysis that transparently demonstrates the analytical steps taken by the petitioner to derive the employment impacts. Depending on the nature of the change, however, we may need to see a revised business plan as well. For instance, suppose the petitioner is requesting to change its methodology from IMPLAN to RIMS II direct employment. In this case, we would need to see the business plan sections that describe the number of projected employees because these values serve as inputs to the RIMS II model.

I foresee that USCIS will be doing a brisk business in amendments in the coming months. There haven’t been any new Regional Center approvals since January, which may mean that USCIS doesn’t have any pending applications unaffected by the tenant occupancy issue. And though the tenant occupancy memo suggested that previous approvals would be respected, I hear through the grapevine that RFEs are being issued that hold Regional Center I-526 petitions to the newly-articulated standards.

RC Application Materials Posted!

I have sighed through the part of  EB-5 stakeholder meetings when a newbie calls in to ask  about the availability of example actual Regional Center applications, and receives the usual and obvious answer that such documents are full of proprietary business detail that USCIS has no right to share with the public. But I sighed too soon. Joseph Whalen just alerted me to the fact that USCIS has released application materials for eight Regional Centers in connection with FOIA (the Freedom of Information and Privacy Act). The file for each RC runs to many hundreds of pages — many of the pages blank (redacted) but also many pages offering bits of actual business plans, offering documents, Requests for Evidence, and responses to RFEs. The EB-5 Related Documents posted by USCIS are as follows:

• Alabama Center for Foreign Investment Regional Center (1KB PDF)
• American Redevelopment Regional Center (1KB PDF)
• Bay Area Regional Center (1KB PDF)
• CMB Summit LLC Regional Center (1KB PDF)
• California Military Bases Export LLC Regional Center (1KB PDF)
• California Wineries & Vineyards LLC Regional Center (1KB PDF)
• Chicagoland Foreign Investment Group Regional Center (1KB PDF)
• Florida Overseas Investment Center (1KB PDF)

A note of caution. These materials will be of interest to voyeurs and historians, but not so useful to those who mainly want an example to copy. Most of the materials are at least three years old, and applications filed in 2012 are subject to different expectations. Also, the heavy redacting means that it’s hard to put these materials in context. For example there’s no way to tell whether the segment of business plan copied on page 652, with many blank pages on either side, represents part of the initial application or an amendment, whether USCIS accepted or challenged that segment, and whether or not the RC actually implemented that aspect of the plan. So I wouldn’t suggest relying on these documents for any guidance, though they are a trove for the curious.